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Basis the GS Patel Committee\u2019s recommendations, the Government had now issued guidelines\/directives to exchanges for improvement of their functioning. These pertained to reducing the cost of public issues, reforming membership norms of exchanges and creating customer protection fund in exchanges. However, distinct from the recommendation of GS Patel Committee to set up a council of securities industries, the Government had envisaged the aforementioned board.<\/span><\/span><\/p>\n<\/div>\n\n
The Prime Minister had also announced the intent of introducing a comprehensive legislation for the orderly regulation of exchanges and to clean up trading malpractices. It was also ideated that the Securities Contracts (Regulation) Act, 1956 may be amended to provide for reorganisation of constitution of all exchanges, broad basing of their governing bodies and increase in memberships in the exchanges.<\/span><\/span><\/p>\n<\/div>\n\n
During 1987 to 1989, the Government issued directives and guidelines to exchanges for setting up market surveillance divisions in exchanges for prevention of malpractices in trading in securities. Further guidelines were issued for amendment in rules\/articles of the exchange for permitting corporate membership in the exchanges.<\/span><\/span><\/p>\n<\/div>\n\n
SBI was granted permission to set up a mutual fund, becoming the first public sector bank to operate a mutual fund. This was in furtherance of the central government notifying setting up\/ establishing and conducting mutual fund as a lawful form of business for banking companies under Section 6(1)(o) of the Banking Regulation Act, 1949. At this point, there were no guidelines issued basis which such permissions could be granted. RBI thus granted permissions basis financial strength of the applicant banks, their methods of operation and overall management, etc. <\/span><\/span><\/p>\n<\/div>\n\n
The year ended without SEBI\u2019s establishment. However, by this point, exchange were empowered to enforce their bye-laws and regulations and to penalise violations by members. Further, governing boards of all exchanges now had government nominee directors. The Securities Contracts (Regulation) Rules, 1957 were amended to provide under Rule 8(4) that where government recommends exchanges shall admit IFCI, IDBI, LIC, GIC, UTI and\/or ICICI as member(s) of the exchange.<\/span><\/span><\/p>\n<\/div>\n\n
Fun Fact – By August 1987, the Bombay Stock Exchange (BSE), Calcutta Stock Exchange (CSE), Delhi Stock Exchange (DSE) and Madras Stock Exchange (MSE) were electronically linked for display of share prices.<\/span><\/span><\/span><\/p>\n<\/div>\n1988<\/span><\/span><\/strong><\/span><\/h2>\n<\/p>\n\n
Dr. S A Dave (Executive Director of IDBI) had been appointed as an officer on special duty to take up work relating to establishment of SEBI. Finally, on April 12, 1988, SEBI was set up. However, it was not yet a statutory body and hence had limited powers. A comprehensive legislation to arm SEBI with adequate powers to discharge its functions remained in works. The primary task before SEBI back in 1988 was the preparation of a draft legislation for the regulation and orderly development of securities market and for investor protection.<\/span><\/span><\/p>\n<\/div>\n\n
Another update in this year was the commencement of operations of the Credit Rating Information Services of India Limited (CRISIL) and Stock Holding Corporation of India (“<\/span>SHCIL<\/span><\/strong>“). SHCIL was set up by 7 all India financial institutions with a share capital of Rs. 7 Crore. The main function of SHCIL was envisioned to be holding custody of securities of the 7 promoter institutions and to handle transfer of securities and collection of dividend\/interest on their behalf.<\/span><\/span><\/p>\n<\/div>\n1989<\/span><\/span><\/strong><\/span><\/h2>\n<\/p>\nReport on the development of capital market (1989)<\/span><\/span><\/strong><\/span><\/h3>\n<\/p>\n\n
A working group of the Planning Commission on the Development of Capital Market published its report in 1989. It made several recommendations, many of which were critical and are reflected under the Securities and Exchange Board of India Act, 1992. Key highlights include the following.<\/span><\/span><\/p>\n<\/div>\n
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